USD / JPY: the pair needs basic guidelines_20/10/2015

Trading recommendations

Buy Stop 119.80. Stop-Loss 119.30. Take-Profit 120.00, 120.15, 120.50

Sell ​​Stop 119.10. Stop-Loss 119.70. Take-Profit 118.85, 118.10


Overview and Dynamics

Strange as it sounds, but it seems that Japanese monetary authorities are interested in increasing the Fed's interest rate in the United States. Japan's economy, though showing signs of recovery, but the rate of inflation in the country remains far below the target level of 2.0%.

According to the latest data, the consumer confidence index in Japan fell to 40.6 in September, instead of the forecast of 41.6 and 41.7 in August, orders for machinery and equipment in September fell by 19.1% in annual terms, compared with a fall of 16.5% in August.

And the European Central Bank and the Bank of Japan are trying to stimulate their economies and accelerate inflation with a program of bond purchases.

At the last meeting in the beginning of the month the Bank of Japan's monetary policy remained unchanged at increasing the money supply by 80 trillion yen a year.

Therefore, the likelihood of ad BOJ for further easing of monetary policy at the next meeting on 30 October high.

On the other hand, investors expect the US economy in the coming months will return to robust growth, which will allow the Fed to raise interest rates. Yet on Thursday representative FOMC Meister said that the US economy is ready for higher short-term interest rates at or close to full employment and strong labor market should return to the 2% inflation over time. This slight increase in interest rates will not restrict economic growth in the United States.

And indeed the Fed chief Janet Yellen, whose presentation is scheduled for today at 18:00 (GMT + 3), leans in favor of raising interest rates in the US before the end of the year.

Also for export-oriented Japanese economy needed a soft monetary policy in the country and a weak yen. If the Fed will not raise interest rates in the United States at the next meeting, on 28 October the risks of monetary easing by the Bank of Japan in the country increased.

Meanwhile, the Japanese index Nikkei Stock Average on the basis of trades rose by 0.4%. USD / JPY has strengthened since the beginning of the week, and is currently located at the levels of the opening day in anticipation of economic data from the US (15:30 GMT + 3) and key speeches by the Fed - FOMC members Powell at 16:15 and Fed chief Janet Yellen at 18:00 (GMT + 3).


Technical Analysis

USD / JPY has returned to the range and stability of the area in which it is mainly traded with the beginning of September, between the levels of 120.60 (EMA144 and 61.8% Fibonacci level) and 119.60 (EMA200 on the daily chart). The pair failed to break below last week's strong support 118.85 (EMA50 on the weekly chart).

OsMA and Stochastic indicators show different dynamics, on the daily chart recommend buying on the 4-hour - sale.

For further direction of USD / JPY pair need fundamental drivers. And, most likely before the Fed meeting (27-28 October) and the Bank of Japan's (30 October) USD / JPY pair is traded near the levels of 119.60, 120.60 without a certain direction.

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